so sánh US GAAP với IFAS

Key updatesOur analysis generally reflects guidance effective in 2012 and finalized by the FASB and the IASB before 31 May 2012; however, we have not included differences related to IFRS

US GAAP versus IFR S

The basics

November 2012

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Table of contents

Introduction

2Financial statement presentation

3Interim financial reporting

6Consolidation, joint venture accounting and equity

method investees/associates

7Business combinations

12Inventory

14Long-lived assets

15Intangible assets

17Impairment of long-lived assets, goodwill and intangibleassets

19Financial instruments

22Foreign currency matters

28Leases

30Income taxes

33Provisions and contingencies

35Revenue recognition

37

Share-based payments

39Employee benefits other than share-based payments

41Earnings per share

43Segment reporting

44Subsequent events

4 5Related parties

47Appendix — The evolution of IFRS

48

Introduction

Convergence continued to be a high priority on

the agendas of both the US Financial

Accounting Standards Board (FASB) and the

International Accounting Standards Board

(IASB) (collectively, the Boards) in 2012

However, the convergence process is designed

t o address only the most significant

differences and/or areas that the Boards have

identified as having the greatest need for

improvement While the converged standards

will be more similar, differences will continue

t o exist between US GAAP as promulgated by

the FASB and International Financial Reporting

Standards (IFRS) as promulgated by the IASB

In this guide, we provide an overview by

accounting area of where the standards are

similar and where differences exist We believe

that any discussion of this topic should not losesight of the fact that the two sets of standardsare generally more alike than different for mostcommonly encountered transactions, with IFRSbeing largely, but not entirely, grounded in thesame basic principles as US GAAP The generalprinciples and conceptual framework are oftenthe same or similar in both sets of standards,leading to similar accounting results Theexistence of any differences — and theirmateriality to an entity’s financial statements —depends on a variety of specific factors,including the nature of the entity, the details ofthe transactions, interpretation of the moregeneral IFRS principles, industry practices andaccounting policy elections where US GAAPand IFRS offer a choice This guide focuses ondifferences most commonly found in presentpractice and, when applicable, provides anoverview of how and when those differencesare expected to converge

Introduction

Key updates

Our analysis generally reflects guidance

effective in 2012 and finalized by the FASB

and the IASB before 31 May 2012; however,

we have not included differences related to

IFRS 9, Financial Instruments, IFRS 10,

Consolidated Financial Statements and

IFRS 11 , Joint Arrangements, except in our

discussion of convergence

We will continue to update this publication

periodically for new developments

The Ernst & Young ―US GAAP-IFRS Differences

Identifier Tool‖ provides a more in-depth review

of differences between US GAAP and IFRS The

Identifier Tool was developed as a resource forcompanies that need to analyze the numerousaccounting decisions and changes inherent in

a conversion to IFRS Conversion is of coursemore than just an accounting exercise, andidentifying accounting differences is only thefirst step in the process Successfully converting

to IFRS also entails ongoing projectmanagement, systems and process changeanalysis, tax considerations and a review of allcompany agreements that are based onfinancial data and measures Ernst & Young’sassurance, tax and advisory professionals areavailable to share their experiences and toassist companies in analyzing all aspects of theconversion process, from the earliest diagnosticstages through ultimate adoption of theinternational standards

To learn more about the Identifier Tool, pleasecontact your local Ernst & Young professional

November 2012

Financial statement presentation

Similarities

There are many similarities in US GAAP and

IFRS guidance on financial statement

presentation Under both sets of standards,

the components of a complete set of financial

statements include: a statement of financial

position, a statement of profit and loss

(i.e., income statement) and a statement of

comprehensive income (either a single

continuous statement or two consecutive

statements), a statement of cash flows and

accompanying notes to the financial

statements Both standards also require the

changes in shareholders’ equity to be

changes in shareholders’ equity to be presented

in the notes to the financial statements whileIFRS requires the changes in shareholders’equity to be presented as a separate statement.Further, both require that the financial

statements be prepared on the accrual basis

of accounting (with the exception of the cashflow statement) except for rare circumstances.Both sets of standards have similar conceptsregarding materiality and consistency thatentities have to consider in preparing theirfinancial statements Differences between thetwo sets of standards tend to arise in the level

of specific guidance provided

presented However, US GAAP allows the

Layout of balance sheet

statements are presented; however, asingle year may be presented in certaincircumstances Public companies mustfollow SEC rules, which typically requirebalance sheets for the two most recentyears, while all other statements mustcover the three-year period ended onthe balance sheet date

US GAAP to prepare the balance sheetand income statement in accordancewith a specific layout; however, publiccompanies must follow the detailedrequirements in Regulation S-X

Comparative information must bedisclosed with respect to the previousperiod for all amounts reported in thecurrent period’s financial statements

IFRS does not prescribe a standardlayout, but includes a list of minimumline items These minimum line itemsare less prescriptive than therequirements in Regulation S-X

Debt associated with a covenantviolation must be presented as currentunless the lender agreement wasreached prior to the balance sheet date.

US GAAP versus IFRSThe basics 3

Financial statement presentation

Balance sheet — Current or non-current classification, All amounts classified as non-current in

tax assets and liabilities related asset or liability, is required

Income statement — No general requirement within US Entities may present expenses based onclassification of GAAP to classify income statement either function or nature (e.g., salaries,expenses items by function or nature However, depreciation) However, if function is

SEC registrants are generally required selected, certain disclosures about the

to present expenses based on function nature of expenses must be included in(e.g., cost of sales, administrative) the notes

Income statement — Restricted to items that are both Prohibited

extraordinary items unusual and infrequent

criteria

Income statement — Discontinued operations classification

criteria disposed of, provided that there will

or involvement with the disposedcomponent

Discontinued operations classification

is for components held for sale ordisposed of that are either a separate

exclusively with an intention to resell.Disclosure of No general requirements within US

performance measures GAAP that address the presentation of

specific performance measures SECregulations define certain keymeasures and require the presentation

Additionally, public companies areprohibited from disclosing non-GAAPmeasures in the financial statementsand accompanying notes

Certain traditional concepts such as

therefore, diversity in practice existsregarding line items, headings andsubtotals presented on the income

presentation of additional line items,headings and subtotals in thestatement of comprehensive incomewhen such presentation is relevant to

an understanding of the entity’sfinancial performance

the beginning of the earliest

retrospective application of a newaccounting policy, or a retrospective

notes to the third balance sheet are

US GAAP versus IFRSThe basics 4

Financial statement presentation

Convergence

Convergence efforts in this area have been put

on hold and further action is not expected in

the near term The Boards suspended their

efforts on the joint project on financial

statement presentation so they could focus on

priority convergence projects Before putting

the project on hold, the Boards issued a staff

draft of the proposed standards and engaged

in a targeted outreach program

The Boards have also delayed work ontheir efforts to converge presentation ofdiscontinued operations The Boardstentatively decided that the definition ofdiscontinued operations would be consistentwith the current definition in IFRS 5,

Non-current Assets Held for Sale and Discontinued Operations, and that certain

requirements in existing US GAAP fordiscontinued operations classification(i.e., elimination of cash flows of thecomponent and prohibition of significantcontinuing involvement) would be eliminated,although disclosure of those and additionalitems would be required There have been nofurther developments on this topic

Interim financial reporting

ng

ASC 270, Interim Reporting, and IAS 34,

Interim Financial Reporting, are substantially

similar except for the treatment of certain costs

described below Both require an entity to apply

the accounting policies that were in effect in the

prior annual period, subject to the adoption of

allow for condensed interim financialstatements and provide for similar disclosurerequirements Neither standard requiresentities to present interim financial information.That is the purview of securities regulatorssuch as the SEC, which requires US publiccompanies to comply with Regulation S-X.new policies that are disclosed Both standards

Convergence

The FASB planned to address presentation

and display of interim financial information

in US GAAP as part of the joint financial

statement presentation project As noted in

the Financial statement presentation section,

further action is not expected on this project

in the near term

Each interim period is viewed as adiscrete reporting period A cost thatdoes not meet the definition of an asset

at the end of an interim period is notdeferred, and a liability recognized at

an interim reporting date mustrepresent an existing obligation

Income taxes are accounted forbased on an annual effective tax rate(similar to US GAAP)

Consolidation, joint venture accounting and equity method investees/associates

an

and

The principal guidance for consolidation of

financial statements, including variable interest

entities (VIEs), under US GAAP is ASC 810,

Consolidation IAS 27 (as revised), Consolidated

and Separate Financial Statements, and SIC-12,

Consolidation — Special Purpose Entities,

contain the IFRS guidance

Under both US GAAP and IFRS, the

determination of whether entities are

consolidated by a reporting entity is based on

control, although differences exist in the

definition of control Generally, all entities

subject to the control of the reporting entity

must be consolidated (although there are

limited exceptions in US GAAP for investment

companies) Further, uniform accountingpolicies are used for all of the entities within aconsolidated group, with certain exceptionsunder US GAAP (e.g., a subsidiary within aspecialized industry may retain the specializedaccounting policies in consolidation)

An equity investment that gives an investorsignificant influence over an investee (referred

to as ―an associate‖ in IFRS) is considered anequity method investment under both

US GAAP (ASC 323, Investments — Equity

Method and Joint Ventures) and IFRS (IAS 28, Investments in Associates) Further, the equity

method of accounting for such investments, ifapplicable, generally is consistent under both

US GAAP and IFRS

Significant differences

US

GAAP IFRS

interests All entities are firstevaluated as potential VIEs If a VIE,the applicable guidance in ASC 810 isfollowed (below) If an entity is not aVIE, it is evaluated for control by

are generally not included in eitherevaluation

Special purpose entities

primary beneficiary (determined based

on the consideration of power andbenefits) to consolidate the VIE Forcertain specified VIEs, the primarybeneficiary is determinedquantitatively based on a majority ofthe exposure to variability

Focus is on the power to control, withcontrol defined as the parent’s ability

to govern the financial and operatingpolicies of an entity to obtain benefits.Control is presumed to exist if theparent owns more than 50% of thevotes, and potential voting rights must

be considered Notion of ―de facto

Under SIC-12, SPEs (entities created toaccomplish a narrow and well-definedobjective) are consolidated when thesubstance of the relationship indicatesthat an entity controls the SPE

Consolidation, joint venture accounting and equity method investees/associates

US

GAAP IFRS

Preparation of

the

without loss of control

Required, although certainindustry-specific exceptions exist(e.g., investment companies)

The reporting entity and theconsolidated entities are permitted

to have different year-ends of up tothree months

The effects of significant eventsoccurring between the reporting dates

controlled entities are disclosed in thefinancial statements

Transactions that result in decreases

in ownership interest in a subsidiarywithout a loss of control are accounted

fo r as equity transactions in theconsolidated entity (that is, no gain orloss is recognized) when: (1) subsidiary

is a business or nonprofit activity (withtwo exceptions: a sale of in substancereal estate and a conveyance of oil andgas mineral rights); or (2) subsidiary isnot a business or nonprofit activity,but the substance of the transaction isnot addressed directly by otherASC Topics

Generally required, but there is a limitedexemption from preparing consolidatedfinancial statements for a parentcompany that is itself a wholly ownedsubsidiary, or is a partially ownedsubsidiary, if certain conditions are met.The financial statements of a parent andits consolidated subsidiaries areprepared as of the same date When theend of the reporting period differs forthe parent and a subsidiary, thesubsidiary prepares (for consolidationpurposes) additional financialstatements as of the same date as thefinancial statements of the parentunless it is impracticable to do so.However, when the difference betweenthe end of the reporting period of theparent and subsidiary is three months orless, the financial statements of thesubsidiary may be adjusted for theeffects of significant transactions andevents, rather than preparing additionalfinancial statements as of the parent’sreporting date

Consistent with US GAAP, except thatthis guidance applies to all subsidiariesunder IAS 27(R), even those that arenot businesses or nonprofit activities,those that involve sales of in substancereal estate or conveyance of oil and gasmineral rights In addition, IAS 27(R)does not address whether that guidanceshould be applied to transactionsinvolving non-subsidiaries that arebusinesses or nonprofit activities

US GAAP versus IFRSThe basics 8

Consolidation, joint venture accounting and equity method investees/associates

or loss on the ownership interest sold

This accounting is limited to thefollowing transactions: (1) loss ofcontrol of a subsidiary that is abusiness or nonprofit activity or agroup of assets that is a business ornonprofit activity (with two exceptions:

a sale of in substance real estate, or aconveyance of oil and gas mineralrights); (2) loss of control of a

subsidiary that is not a business ornonprofit activity if the substance ofthe transaction is not addressedConsistent with US GAAP, except thatthis guidance applies to all subsidiariesunder IAS 27(R), even those that arenot businesses or nonprofit activities orthose that involve sales of in substancereal estate or conveyance of oil and gasmineral rights In addition, IAS 27(R)does not address whether that guidanceshould be applied to transactionsinvolving non-subsidiaries that arebusinesses or nonprofit activities.IAS 27(R) also does not address thederecognition of assets outside theloss of control of a subsidiary

Equity method Potential voting rights are generally In determining significant influence,

investments not considered in the determination of potential voting rights are considered if

significant influence currently exercisable

ASC 825-10, Financial Instruments, The fair value option is not available togives entities the option to account for investors (other than venture capital

management does not elect to use the and similar entities) to account for theirfair value option, the equity method of investments in associates

accounting is required IAS 28 generally requires investors

(other than venture capitalorganizations, mutual funds, unit trusts,and similar entities) to use the equitymethod of accounting for theirinvestments in associates in consolidatedfinancial statements If separate financialstatements are presented (i.e., by aparent or investor), subsidiaries andassociates can be accounted for at eithercost or fair value

Uniform accounting policies between Uniform accounting policies betweeninvestor and investee are not required investor and investee are required

n a

directly by other ASC Topics

US GAAP versus IFRSThe basics 9

Consolidation, joint venture accounting and equity method investees/associates

Convergence

In May 2011, the IASB issued IFRS 10,

Consolidated Financial Statements, which

replaces IAS 27(R) and SIC-12 and provides a

single control model The FASB chose not to

pursue a single consolidation model at this time

and instead is making targeted revisions to the

consolidation models within US GAAP The

FASB’s proposed amendments to the

consideration of kick-out rights and principal

versus agent relationships would more closely

align the consolidation guidance under

US GAAP with IFRS However, certain

differences between consolidation guidance

under IFRS and US GAAP (e.g., effective

control, potential voting rights) will continue to

exist IFRS 10 is effective for annual periods

beginning on or after 1 January 2013, with

earlier application permitted The FASB’s

exposure draft was issued on 3 November

2011 and comments were received by 15

February 2012 The FASB technical plan calls

for a final Accounting Standards Update to be

issued in the first half of 2013

In May 2011, the IASB also issued IFRS 11,

Joint Arrangements, which replaces IAS 31 ,

Interests in Joint Ventures, and SIC-13,

Jointly Controlled Entities — Non-monetary

Contributions by Venturers IFRS 11 establishes

a principles-based approach to determining theaccounting for joint arrangements In doing so,IFRS 11 eliminates proportionate consolidationand requires joint arrangements classified asjoint ventures to be accounted for using theequity method This change is expected toreduce differences between IFRS and US GAAP.Jointly controlled assets and jointly controlledoperations under IAS 31 are generally expected

to be considered joint operations subject to jointoperation accounting under IFRS 11 Jointoperations will recognize their assets, liabilities,revenues and expenses, and relative sharesthereof IFRS 11 is effective for annual periodsbeginning on or after 1 January 2013, withearlier application permitted

In May 2011, the IASB also issued a revisedIAS 28, Investments in Associates and Joint

Ventures (referred as IAS 28 (2011) in thispublication) The revised standard resultedfrom the IASB’s consolidation project IAS 28was amended to include the application of theequity method to investments in joint ventures(as defined in IFRS 11) IAS 28 (2011) iseffective for annual periods beginning on

or after 1 January 2013, with earlierapplication permitted

equity method of accounting (or at fairvalue, if the fair value option iselected) Proportionate consolidationmay be permitted in limitedcircumstances to account for interests

practice (i.e., in the construction andextractive industries)

IAS 31, Interests in Joint Ventures,permits either the proportionateconsolidation method or the equitymethod of accounting for interests injointly controlled entities The fair valueoption is not available to investors(other than venture capitalorganizations, mutual funds, unit trusts,and similar entities) to account for theirinvestments in jointly controlled entities

Consolidation, joint venture accounting and equity method investees/associates

The IASB also issued IFRS 12, Disclosure of

Interests in Other Entities, in May 2011, which

includes all of the disclosure requirements for

subsidiaries, joint arrangements, associates

and consolidated and unconsolidated

structured entities IFRS 12 is effective for

annual periods beginning on or after 1 January

2013, with earlier application permitted

Note that this publication does not address the

differences between US GAAP and IFRS

resulting from IFRS 10, IFRS 11 and IFRS 12

The FASB is addressing the accounting for

equity method investments in the

redeliberation of its May 2010 Exposure Draft,

Accounting for Financial Instruments and

Revisions to the Accounting for Derivative

Instruments and Hedging Activities.

The FASB and the IASB have issued proposals

t o establish consistent criteria for determining

whether an entity is an investment company

(the IASB uses the term ―investment entity )‖

In October 2012, the IASB issued an

amendment to IFRS 10 to provide an

exception to the consolidation requirement

for entities that meet the definition of an

investment company Generally, investment

companies would be excluded from

consolidating controlled investments The

FASB is continuing to work on its proposed

amendments to the US GAAP definition of an

investment company, which may bring

US GAA

P and IF

RS furth

er into alignment

However, US GAAP and IFRS differences

in accounting and reporting for investment

companies will remain The FASB intends to

issue its final standard in the first half of 2013

Business combinations

Similarities

The principal guidance for business

combinations in US GAAP (ASC 805, Business

the first major convergence project betweenthe IASB and the FASB Pursuant to ASC 805and IFRS 3(R), all business combinations areaccounted for using the acquisition method

Upon obtaining control of another entity, the

Measurement of Noncontrolling interest is measured at

noncontrolling interest fair value, including goodwill Noncontrolling interest componentsthat are present ownership interests

and entitle their holders to aproportionate share of the acquiree’snet asset in the event of liquidation may

be measured at: (1) fair value, includinggoodwill, or (2) at the noncontrollinginterest’s proportionate share of thefair value of the acquiree’s identifiablenet assets, exclusive of goodwill

All other components of noncontrollinginterest are measured at fair valueunless another measurement basis isrequired by IFRS

The choice is available on a

Acquiree’s operating If the terms of an acquiree operating

leases lease are favorable or unfavorable

relative to market terms, the acquirerrecognizes an intangible asset orliability, respectively, regardless of

the lessee

Separate recognition of an intangibleasset or liability is required only if theacquiree is a lessee If the acquiree is thelessor, the terms of the lease are takeninto account in estimating the fair value

Separate recognition of an intangibleasset or liability is not required

ns

underlying transaction is measured at fairvalue, establishing the basis on which theassets, liabilities and noncontrolling interests

of the acquired entity are measured Asdescribed below, IFRS 3(R) provides analternative to measuring noncontrollinginterest at fair value with limited exceptions.Although the new standards are substantiallyconverged, certain differences still exist

Initial recognition and measurement

Assets and liabilities arising fromcontingencies are recognized at fairvalue (in accordance with ASC 8 20,

Fair Value Measurement) if the fair

value can be determined during themeasurement period Otherwise, thoseassets or liabilities are recognized atthe acquisition date in accordance withASC 450, Contingencies, if thosecriteria for recognition are met

Contingent assets and liabilities that

do not meet either of these recognitioncriteria at the acquisition date aresubsequently accounted for inaccordance with other applicableliterature, including ASC 450

(See ―Provisions and Contingencies‖

fo r differences between ASC 450and IAS 37)

Initial recognition and measurement

Liabilities arising from contingenciesare recognized as of the acquisitiondate if there is a present obligation thatarises from past events and the fairvalue can be measured reliably.Contingent assets are not recognized

Combination of entities

Subsequent measurement

If contingent assets and liabilities areinitially recognized at fair value, anacquirer should develop a systematicand rational basis for subsequentlymeasuring and accounting for thoseassets and liabilities depending ontheir nature

Significant differences

net

If amounts are initially recogni

or (2) the amount initially recognizedless, if appropriate, cumulativeamortization recognized in accordancewith IAS 18

Outside the scope of IFRS 3(R) In

practice, either follow an approachsimilar to US GAAP (historical cost) orapply the acquisition method (fairvalue) if there is substance to thetransaction (policy election)

Other differences may arise due to different

accounting requirements of other existing

US GAAP and IFRS literature (e.g., identifying

the acquirer, definition of control, replacement

of share-based payment awards, initial

classification and subsequent measurement of

contingent consideration, initial recognition andmeasurement of income taxes, initial recognitionand measurement of employee benefits)

Convergence

No further convergence is planned at this time

Inventory

Similarities

ASC 330, Inventory, and IAS 2, Inventories,

are based on the principle that the primary

basis of accounting for inventory is cost Both

define inventory as assets held for sale in the

ordinary course of business, in the process of

production for such sale or to be consumed

in the production of goods or services

such as retail inventory method, are similarunder both US GAAP and IFRS Further, underboth sets of standards, the cost of inventoryincludes all direct expenditures to readyinventory for sale, including allocableoverhead, while selling costs are excluded fromthe cost of inventories, as are most storagecosts and general administrative costs

Permissible techniques for cost measurement,

Significant differences

US

GAAP IFRS

Consistent cost formula for allinventories similar in nature is notexplicitly required

or market Market is defined as currentreplacement cost, but not greater thannet realizable value (estimated sellingprice less reasonable costs ofcompletion and sale) and not less thannet realizable value reduced by anormal sales margin

Reversal of inventory

lower of cost or market creates a new

cost basis that subsequently cannot

be reversed

Inventory

he

LIFO is prohibited Same cost formula

must be applied to all inventories

similar in nature or use to the entity

value is defined as the estimated selling

price less the estimated costs of

completion and the estimated costsnecessary to make the sale

Previously recognized impairmentlosses are reversed up to the amount

of the original impairment loss whenthe reasons for the impairment nolonger exist

Permanent inventory

markdowns under the

retail inventory method

(RIM)

Permanent markdowns do not affectthe gross margins used in applying theRIM Rather, such markdowns reducethe carrying cost of inventory to netrealizable value, less an allowance for

an approximately normal profit margin,which may be less than both originalcost and net realizable value

Permanent markdowns affect theaverage gross margin used in applyingthe RIM Reduction of the carrying cost

of inventory to below the lower of cost

or net realizable value is not allowed

Convergence

No further convergence is planned at this time

Long-lived assets

Similarities

Although US GAAP does not have a

comprehensive standard that addresses

long-lived assets, its definition of property, plant

and equipment is similar to IAS 16, Property,

Plant and Equipment, which addresses tangible

assets held for use that are expected to be used

for more than one reporting period Other

concepts that are similar include the following:

Cost

Both accounting models have similar

recognition criteria, requiring that costs be

included in the cost of the asset if future

economic benefits are probable and can be

reliably measured Neither model allows the

capitalization of start-up costs, general

administrative and overhead costs or regular

maintenance Both US GAAP and IFRS require

that the costs of dismantling an asset and

restoring its site (i.e., the costs of asset

retirement under ASC 410-20, Asset

Retirement and Environmental Obligations —

Asset Retirement Obligations or IAS 37,

Provisions, Contingent Liabilities and Contingent Assets) be included in the cost

of the asset when there is a legal obligation,but IFRS requires provision in othercircumstances as well

Long-lived

assets

Depreciation of long-lived assets is required

on a systematic basis under both accounting

models ASC 250, Accounting Changes and

Error Corrections, and IAS 8, Accounting

Policies, Changes in Accounting Estimates and

Errors, both treat changes in residual value and

useful economic life as a change in accounting

estimate requiring prospective treatment

Assets held for sale

Assets held for sale criteria are similar in the

Impairment or Disposal of Long-Lived Assets

subsections of ASC 360-10, Property, Plant

and Equipment, and IFRS 5, Non-current Assets Held for Sale and Discontinued Operations.

Under bo

th standards, the asset is measured

at the lower of it

s carrying amount or fairvalue less costs to sell, the assets are notdepreciated and they are presented separately

on the face of the balance sheet Exchanges ofnonmonetary similar productive assets are alsotreated similarly under ASC 845, Nonmonetary

Transactions, and IAS 16, Property, Plant and

Equipment, both of which allow gain or lossrecognition if the exchange has commercialsubstance and the fair value of the exchangecan be reliably measured

Capitalized interest

ASC 835-20, Interest — Capitalization of

Interest, and IAS 23, Borrowing Costs,

require the capitalization of borrowing costs

(e.g., interest costs) directly attributable to

the acquisition, construction or production of

a qualifying asset Qualifying assets are

generally defined similarly under both

accounting models However, there are

differences between US GAAP and IFRS in

the measurement of eligible borrowing costs

For borrowings associated with a

specific qualifying asset, borrowing

policy election for an entire class ofassets, requiring revaluation to fairvalue on a regular basis

costs equal to the weighted-averageaccumulated expenditures times theborrowing rate are capitalized.

Costs of a major

evolved in practice, including: expensecosts as incurred, capitalize costs andamortize through the date of the nextoverhaul, or follow the IFRS approach

defined and, therefore, is accountedfor as held for use or held for sale

Eligible borrowing costs includeexchange rate differences from foreigncurrency borrowings For borrowingsassociated with a specific qualifyingasset, actual borrowing costs arecapitalized offset by investmentincome earned on those borrowings

Costs that represent a replacement of

a previously identified component of anasset are capitalized if future economicbenefits are probable and the costs can

be reliably measured

Investment property is separately

as property held to earn rent or forcapital appreciation (or both) and mayinclude property held by lessees under afinance or operating lease Investmentproperty may be accounted for on ahistorical cost basis or on a fair valuebasis as an accounting policy election.Capitalized operating leases classified asinvestment property must be accountedfor using the fair value model

Other differences include: hedging gains and

losses related to the purchase of assets,

constructive obligations to retire assets, the

discount rate used to calculate asset

retirement costs and the accounting for

changes in the residual value

Both US GAAP (ASC 805, Business

Goodwill and Other) and IFRS (IFRS 3(R),

Business Combinations, and IAS 38, Intangible

Assets) define intangible assets as

nonmonetary assets without physical

substance The recognition criteria for both

accounting models require that there be

probable future economic benefits from costs

that can be reliably measured, although some

costs are never capitalized as intangible assets

(e.g., start-up costs) Goodwill is recognized

only in a business combination With theexception of development costs (addressedbelow), internally developed intangibles are notrecognized as assets under either ASC 350 orIAS 38 Moreover, internal costs related to the

s

research phase of research and development

are expensed as incurred under both

accounting models

Amortization of intangible assets over their

estimated useful lives is required under both

US GAAP and IFRS, with one US GAAP minor

exception in ASC 985-20, Software — Costs of

Software to be Sold, Leased or Marketed,

related to the amortization of computersoftware sold to others In both sets of

standards, if there is no foreseeable limit tothe period over which an intangible asset isexpected to generate net cash inflows to theentity, the useful life is considered to beindefinite and the asset is not amortized.Goodwill is never amortized under either

US GAAP or IFRS

Significant differences

US

GAAP IFRS

incurred unless addressed by guidance

in another ASC Topic Developmentcosts related to computer softwaredeveloped for external use arecapitalized once technological feasibility

is established in accordance withspecific criteria (ASC 985-20) In thecase of software developed for internaluse, only those costs incurred duringthe application development stage (asdefined in ASC 350-40, Intangibles —

Goodwill and Other — Internal-Use Software) may be capitalized

either expensed as incurred orexpensed when the advertising takesplace for the first time (policy choice)

Direct response advertising may becapitalized if the specific criteria inASC 340-20, Other Assets and

Deferred Costs — Capitalized Advertising Costs, are met.

Development costs are capitalizedwhen technical and economic feasibility

of a project can be demonstrated inaccordance with specific criteria,including: demonstrating technicalfeasibility, intent to complete the asset,and ability to sell the asset in thefuture Although application of theseprinciples may be largely consistentwith ASC 985- 20 and ASC 350-40,there is no separate guidanceaddressing computer softwaredevelopment costs

Advertising and promotional costs areexpensed as incurred A prepaymentmay be recognized as an asset onlywhen payment for the goods orservices is made in advance of theentity having access to the goods orreceiving the services

Intangible assets

assets other than goodwill is a

revaluation requires reference to an

intangible, this is relatively uncommon

in practice

No further convergence is planned at this time.

Impairment of long-lived assets, goodwill and intangible assets

Similarities

Under both US GAAP and IFRS, long-lived

assets are not tested annually, but rather when

there are similarly defined indicators of

impairment Both standards require goodwill

and intangible assets with indefinite useful lives

to be tested at least annually for impairment

and more frequently if impairment indicators

are present In addition, both US GAAP and

IFRS require that the impaired asset be written

ASC 350, Intangibles — Goodwill and Other,

Impairment or Disposal of Long-Lived Assets

subsections of ASC 360-10, Property, Plant

and Equipment, and IAS 36, Impairment of Assets, apply to most long-lived and intangibleassets, although some of the scope exceptionslisted in the standards differ Despite thesimilarity in overall objectives, differences exist

in the way impairment is tested, recognizedand measured

down and an impairment loss recognized

Significant differences

Convergence

calculation — long-lived amount of the asset exceeds its fair

assets value, as calculated in accordance with

ASC 820

The amount by which the carryingamount of the asset exceeds its

amount is the higher of: (1) fair valueless costs to sell and (2) value in use(the present value of future cash flows

which is defined as an operating

operating segment (component)

Goodwill is allocated to acash-generating unit (CGU) or group ofCGUs that represents the lowest levelwithin the entity at which the goodwill

is monitored for internal managementpurposes and cannot be larger than anoperating segment (before

aggregation) as defined in IFRS 8,

Operating Segments.

and

If it is determined that the asset is notrecoverable, an impairment lossOne-step approach requires thatimpairment loss calculation beperformed if impairment indicatorsexist.

Impairment of long-lived assets, goodwill and intangible assets

amount of goodwill exceeds the impliedfair value of the goodwill within itsreporting unit

One-step approach requires that animpairment test be done at the CGUlevel by comparing the CGU’s carryingamount, including goodwill, with itsrecoverable amount

Impairment loss on the CGU (amount

by which the CGU’s carrying amount,including goodwill, exceeds itsrecoverable amount) is allocated first

to reduce goodwill to zero, then,subject to certain limitations, thecarrying amount of other assets in theCGU are reduced pro rata, based on thecarrying amount of each asset.Level of assessment —

separately recognized should be

calculation is required

calculation — of the asset exceeds its fair value value of the asset exceeds its

indefinite-lived recoverable amount

Reversal of loss Prohibited for all assets to be held

the end of each reporting period forreversal indicators If appropriate, lossshould be reversed up to the newly

exceed the initial carrying amountadjusted for depreciation

to

carrying

assessed for impairment indiv

as a single asset (i.e., the

indefinite-lived intangible assets areessentially inseparable) Indefinite-livedintangible assets may not be combinedwith other assets (e.g., finite-livedintangible assets or goodwill) for

If the indefinite-lived intangible asset

does not generate cash inflows that arelargely independent of those fromother assets or groups of assets, thenthe indefinite-lived intangible assetshould be tested for impairment as part

of the CGU to which it belongs, unlesscertain conditions are met

Impairment of long-lived assets, goodwill and intangible assets

Convergence

No further convergence is planned at this time

In July 2012, the FASB issued guidance that

gives companies the option to perform a

qualitative impairment assessment for

indefinite-lived intangible assets that may allow

them to skip the annual fair value calculation

The guidance is effective for annual and interim

impairment tests performed for fiscal years

beginning after 15 September 2012 Early

adoption is permitted The guidance is similar

t o the qualitative screen to test goodwill

for impairment

US GAAP versus IFRSThe basics 21

Financial instruments

Similarities

The US GAAP guidance for financial instruments

is located in numerous ASC Topics, including

ASC 310, Receivables; ASC 320, Investments —

Debt and Equity Securities; ASC 470, Debt;

ASC 480, Distinguishing Liabilities from Equity;

ASC 815, Derivatives and Hedging; ASC 820,

Fair Value Measurement; ASC 825, Financial

Servicing; and ASC 948, Financial Services —

Mortgage Banking.

IFRS guidance for financial instruments, on the

other hand, is limited to IAS 32, Financial

Instruments: Presentation; IAS 39, Financial

Instruments: Recognition and Measurement;

IFRS 7, Financial Instruments: Disclosures;IFRS 9, Financial Instruments, if early adopted;and IFRS 13, Fair Value Measurement

Both US GAAP and IFRS (1) require financialinstruments to be classified into specificcategories to determine the measurement ofthose instruments, (2) clarify when financialinstruments should be recognized orderecognized in financial statements, (3) requirethe recognition of all derivatives on the balancesheet and (4) require detailed disclosures inthe notes to the financial statements for thefinancial instruments reported in the balancesheet Both sets of standards also allow hedgeaccounting and the use of a fair value option

Significant differences

US

GAAP IFRS

Debt vs equity

instruments with characteristics ofboth debt and equity that must beclassified as liabilities

Certain other contracts that areindexed to, and potentially settled in,

an entity’s own stock may be classified

as equity if they either: (1) requirephysical settlement or net-sharesettlement, or (2) give the issuer achoice of net-cash settlement orsettlement in its own shares

Compound (hybrid)

(e.g., convertible bonds) are not split intodebt and equity components unlesscertain specific conditions are met, butthey may be bifurcated into debt andderivative components, with thederivative component subject to fairvalue accounting

Classification of certain instrumentswith characteristics of both debt andequity focuses on the contractualobligation to deliver cash, assets or anentity’s own shares Economiccompulsion does not constitute acontractual obligation

Contracts that are indexed to, andpotentially settled in, an entity’s ownstock are classified as equity if settledonly by delivering a fixed number ofshares for a fixed amount of cash

Compound (hybrid) financialinstruments are required to be splitinto a debt and equity component and,

if applicable, a derivative component.The derivative component may besubject to fair value accounting

s

instruments

US GAAP versus IFRSThe basics 22

Financial instruments

US

GAAP IFRS

Recognition and measurement

Impairment recognition — Declines in fair value below cost may

an AFS debt instrument due solely to achange in interest rates (risk-free orotherwise) if the entity has the intent

to sell the debt instrument or it is morelikely than not that it will be required

to sell the debt instrument beforeits anticipated recovery In thiscircumstance, the impairment loss ismeasured as the difference betweenthe debt instrument’s amortized costbasis and its fair value

When a credit loss exists, but (1) theentity does not intend to sell the debtinstrument, or (2) it is not more likelythan not that the entity will be required

to sell the debt instrument before therecovery of the remaining cost basis,the impairment is separated into theamount representing the credit lossand the amount related to all otherfactors The amount of the totalimpairment related to the credit loss isrecognized in the income statementand the amount related to all otherfactors is recognized in othercomprehensive income, net ofapplicable taxes

When an impairment loss is recognized

in the income statement, a new costbasis in the instrument is establishedequal to the previous cost basis less theimpairment recognized in earnings

income statement cannot be reversedfor any future recoveries

Generally, only objective evidence ofone or more credit loss events result

in an impairment being recognized inthe statement of comprehensiveincome for an AFS debt instrument.The impairment loss is measured asthe difference between the debtinstrument’s amortized cost basis andits fair value

Impairment losses for AFS debtinstruments may be reversed throughthe statement of comprehensiveincome if the fair value of theinstrument increases in a subsequentperiod and the increase can beobjectively related to an eventoccurring after the impairment losswas recognized

An entity must have the intent andability to hold an impaired equityinstrument until such near-termrecovery; otherwise an impairment lossmust be recognized in the incomestatement.

Impairment of an AFS equityinstrument is recognized in thestatement of comprehensive incomewhen there is objective evidence thatthe AFS equity instrument is impairedand the cost of the investment in theequity instrument may not berecovered A significant or prolongeddecline in the fair value of an equityinstrument below its cost is consideredobjective evidence of an impairment

Impairment recognition — The impairment loss of an HTM

amortized cost basis The amount ofthe total impairment related to thecredit loss is recognized in the incomestatement, and the amount related toall other factors is recognized in othercomprehensive income

The carrying amount of an HTMinvestment after recognition of animpairment is the fair value of the debtinstrument at the date of theimpairment The new cost basis of thedebt instrument is equal to theprevious cost basis less the impairmentrecognized in the income statement

The impairment recognized in othercomprehensive income is accreted tothe carrying amount of the HTMinstrument through othercomprehensive income over itsremaining life

Derivatives and hedging

underlyings, one or more notionalamounts or payment provisions orboth, must require no initial netinvestment, as defined, and must beable to be settled net, as defined

Certain scope exceptions exist forinstruments that would otherwise meetthese criteria

The impairment loss of an HTMinstrument is measured as thedifference between the carryingamount of the instrument and thepresent value of estimated future cashflows discounted at the instrument’soriginal effective interest rate Thecarrying amount of the instrument isreduced either directly or through theuse of an allowance account Theamount of impairment loss isrecognized in the statement ofcomprehensive income

The IFRS definition of a derivative doesnot include a requirement that anotional amount be indicated, nor isnet settlement a requirement Certain

of the scope exceptions under IFRSdiffer from those under US GAAP

Financial instruments

GAAP IFRS

component of a financial hedged are specifically defined by the

swaps hedging recognized debtinstruments is permitted

The long-haul method of assessing andmeasuring hedge effectiveness for a fairvalue hedge of the benchmark interestrate component of a fixed rate debtinstrument requires that all contractualcash flows be considered in calculatingthe change in the hedged item’s fairvalue even though only a component ofthe contractual coupon payment is thedesignated hedged item

Allows risks associated with only aportion of the instrument’s cash flows

or fair value (such as one or moreselected contractual cash flows orportions of them or a percentage of thefair value) provided that effectivenesscan be measured: that is, the portion isidentifiable and separately measurable.The shortcut method for interest rateswaps hedging recognized debt is notpermitted

Under IFRS, assessment andmeasurement of hedge effectivenessconsiders only the change in fair value

of the designated hedged portion of theinstrument’s cash flows, as long as theportion is identifiable and separatelymeasurable

legally isolated from the transferor

transferee is a securitization entity

or an entity whose sole purpose is tofacilitate an asset-backed financing,each holder of its beneficialinterests), has the right to pledge orexchange the transferred financialassets (or beneficial interests)

effective control over thetransferred financial assets orbeneficial interests (e.g., through acall option or repurchase

agreement)

Derecognition of financial assets isbased on a mixed model that considerstransfer of risks and rewards andcontrol Transfer of control isconsidered only when the transfer ofrisks and rewards assessment is notconclusive If the transferor has neitherretained nor transferred substantiallyall of the risks and rewards, there isthen an evaluation of the transfer ofcontrol Control is considered to besurrendered if the transferee has thepractical ability to unilaterally sell thetransferred asset to a third partywithout restrictions There is no legalisolation test

Financial instruments

s

GAAP IFRS

The derecognition criteria may beapplied to a portion of a financial assetonly if it mirrors the characteristics ofthe original entire financial asset

Loans and receivables

Measurement — effective Requires catch-up approach,

method of calculating the interest foramortized cost-based assets,depending on the type of instrument

Measurement — loans

loans and receivables are classified aseither: (1) held for investment, whichare measured at amortized cost, or(2) held for sale, which are measured

at the lower of cost or fair value

Fair value after the adoption of IFRS 13

Day one gains and losses Entities are not precluded from

recognizing day one gains and losses onfinancial instruments reported at fairvalue even when all inputs to themeasurement model are notobservable Unlike IFRS, US GAAPcontains no specific requirementsregarding the observability of inputs,thereby potentially allowing for therecognition of gains or losses at initialrecognition of an asset or liability evenwhen the fair value measurement isbased on a valuation model withsignificant unobservable inputs(i.e., Level 3 measurements)

Practical expedient for

expedient to estimate the fair value ofcertain alternative investments (e.g., alimited partner interest in a PrivateEquity fund) using net asset value pershare (NAV) or its equivalent

The derecognition provisions may beapplied to a portion of a financial asset

if the cash flows are specificallyidentified or represent a pro rata share

of the financial asset or a pro ratashare of specifically identified cashflows

Requires the original effective interestrate to be used throughout the life of theinstrument for all financial assets andliabilities, except for certain reclassifiedfinancial assets, in which case the effect

of increases in cash flows are recognized

as prospective adjustments to theeffective interest rate

Loans and receivables are carried atamortized cost unless classified intothe ―fair value through profit or loss‖category or the ―available for sale‖category, both of which are carried atfair value on the balance sheet

Day one gains and losses on financialinstruments are recognized only whentheir fair value is evidenced by aquoted price in an active market for anidentical asset or liability (i.e., a level 1

or level 2 input) or based on a valuationtechnique that uses only data fromobservable markets

No practical expedient to assume thatNAV represents the fair value ofcertain alternative investments

Financial instruments

Other differences include: (1) definitions of a

derivative and embedded derivative, (2) cash

flow hedge — basis adjustment andeffectiveness testing, (3) normal purchaseand sale exception, (4) foreign exchangegain and/or losses on AFS investments,5) recognition of basis adjustments whenhedging future transactions, (6) macrohedging, (7) hedging net investments, (8) cashflow hedge of intercompany transactions,

elected,

practical